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US: A.I.G. Role for Ex-Chief of S.E.C.

by  Jenny AndersonNew York Times
July 6th, 2005

The American International Group has hired Arthur Levitt, a former Securities and Exchange Commission chairman, as a consultant to the board in an effort to quell dissent from institutional investors.

Arthur Levitt will help evaluate nominees to the board and advise on corporate governance issues.

He will help evaluate potential nominees to the board and advise on corporate governance issues.

The appointment of Mr. Levitt is the latest step taken by the board to repair A.I.G.'s reputation in the face of state and federal investigations. The New York attorney general and the New York insurance department have sued the company, a giant in commercial and life insurance, and its former top two executives, accusing them of manipulating financial statements and misleading regulators.

At the same time, a New York grand jury has been convened to weigh criminal charges against individuals in the A.I.G. case, and the Justice Department and the Securities and Exchange Commission are also investigating.

While the board has been praised by regulators for moving quickly to force out its chairman and chief executive, Maurice R. Greenberg, it has also been criticized for not being vigilant and independent enough for years under Mr. Greenberg.

"We think it's a hopeful development," said Pat Macht, a spokeswoman for the California Public Employees' Retirement System, the huge pension fund known as Calpers, about Mr. Levitt's appointment. "It's no secret we think A.I.G.'s top order of business is a top-level review of corporate governance."

In April, Calpers announced that A.I.G. was at the top of its "focus list" of poor financial and corporate governance performers. The pension fund's investment in the company cost Calpers $240 million in losses, according to an April 20 disclosure. A.I.G.'s stock price has fallen 19 percent since the company disclosed on Feb. 14 that it had received subpoenas from the S.E.C. and the New York attorney general.

Calpers had earlier recommend that Mr. Levitt be named to the board of A.I.G. In April, the board's interim chairman, Frank G. Zarb, approached Mr. Levitt to consider a seat on the board, people briefed on the board's actions said.

Mr. Levitt declined the board seat but agreed to the consultant role.

Mr. Levitt and Mr. Zarb have a history of conflict resolution together. Mr. Levitt, who served as S.E.C. chairman from 1993 through 2001, drafted Mr. Zarb to take over as chairman and chief executive at NASD as well at the Nasdaq stock market at a time when that organization was reeling from a price-fixing scandal.

Mr. Levitt "will advise A.I.G. on a wide range of corporate governance matters, work with A.I.G. as it seeks to recruit the best-qualified directors to represent all A.I.G. shareholders and assist A.I.G. as it reaches out to all of its shareholders," Martin J. Sullivan, the company's chief executive, said in a statement.

Mr. Levitt declined to comment.

His tenure, which is expected to be less than a year, is among the steps A.I.G. has taken to overhaul its corporate governance practices. Last month, the company amended its bylaws to require that it have a separate chief executive and chairman, a board that is two-thirds independent and a process for independent directors to select the chairman.

Currently A.I.G. has 16 board members. Frank J. Hoenemeyer will not run for re-election, leaving a total of 15, with 11 of them independent, 3 who are executives of the company, and one who is nonmanagement but does not qualify as independent. The company will hold its annual meeting on Aug. 11.

A number of lawsuits have been filed against A.I.G. by major shareholders. The American Federation of State, County and Municipal Employees union has sued, as has the Ohio attorney general, Jim Petro.

"Arthur Levitt is a highly respected corporate governance leader who we expect will bring additional reforms to the A.I.G. board," said Richard C. Ferlauto, director of pension and benefits policy at the federation. "The issues outstanding are three open board seats, shareholder access to the proxy for board nominations and the structure and operation of the audit committee."



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